MARKETS UPDATE (11:00 pm EDT)
The DOW and S&P 500 have been rallying strongly off their deep lows on April 7 (36,611 and 4,835, respectively), and both have succeeded in breaking above their 15-day and 45-day moving averages. This strongly suggests they have started new medium-term cycles, and maybe even a new 3 year cycle. If that's the case, we should be seeing their all-time highs being tested and possibly exceeded soon. Nevertheless, we are already four weeks into the cycle, so a sub-cycle peak and correction could be imminent. If this cycle is super bullish, we may not see a top until we enter the next strong reversal zone (May 16 - 26), but it could also peak before then and make its final corrective low in that same time frame. We will have to wait and see how this play out. Any modest correction that stays well above the April 7 lows will probably be a good place to buy for a rally that should at least test this market's all-time highs. We are still on the sidelines of the broad stock market.
A significant low formed in both gold and silver on April 7, and both metals rallied sharply from there. Gold made a new all-time high at $3496 on April 22, but silver's rally to $33.66 on April 25 failed to even exceed its March high of $34.54. This creates a strong case of bearish divergence between the two metals, and indeed, both have fallen sharply from those highs. Today, however, gold is rallying sharply (but silver not so much). We will keep our eye on gold (as we sold it short at the price peak on April 22), but I suspect both metals will continue to fall lower - probably into our next reversal zone coming up May 16 - 26. A good stop loss for our short position in gold would be any break and close above $3500. I am maintaining my short position in gold (we are on the sidelines of silver) as I expect prices to fall at least to the 45-day moving average (now at $3125 and rising) and possibly even lower ($2900 - $3000).
Today crude oil made a double-bottom to its recent (April 9) low near $56 (July contract chart). As I've pointed out in recent blogs, it appears crude's trend has turned bearish, at least short-term, so it looks like prices could go lower. Although we may see a short-term bounce in prices from this support around $56, we are not in any reversal zones for two more weeks, so I suspect prices will turn back down and break that support.
President Trump is now promising a significant drop in gasoline prices (and the price of oil), and I think it would be foolish at this point to not take him seriously. Cycle analysis shows that crude could get as low as the $30 - $40 range by early next year. This market, however, could turn bullish again if the low from April 9 ($54.33) holds and prices can rally back above the 15-day and 45-day moving averages. I don't think this is likely, but anything seems to be possible these days. I am staying on the sidelines of crude for now.
The DOW and S&P 500 have been rallying strongly off their deep lows on April 7 (36,611 and 4,835, respectively), and both have succeeded in breaking above their 15-day and 45-day moving averages. This strongly suggests they have started new medium-term cycles, and maybe even a new 3 year cycle. If that's the case, we should be seeing their all-time highs being tested and possibly exceeded soon. Nevertheless, we are already four weeks into the cycle, so a sub-cycle peak and correction could be imminent. If this cycle is super bullish, we may not see a top until we enter the next strong reversal zone (May 16 - 26), but it could also peak before then and make its final corrective low in that same time frame. We will have to wait and see how this play out. Any modest correction that stays well above the April 7 lows will probably be a good place to buy for a rally that should at least test this market's all-time highs. We are still on the sidelines of the broad stock market.
A significant low formed in both gold and silver on April 7, and both metals rallied sharply from there. Gold made a new all-time high at $3496 on April 22, but silver's rally to $33.66 on April 25 failed to even exceed its March high of $34.54. This creates a strong case of bearish divergence between the two metals, and indeed, both have fallen sharply from those highs. Today, however, gold is rallying sharply (but silver not so much). We will keep our eye on gold (as we sold it short at the price peak on April 22), but I suspect both metals will continue to fall lower - probably into our next reversal zone coming up May 16 - 26. A good stop loss for our short position in gold would be any break and close above $3500. I am maintaining my short position in gold (we are on the sidelines of silver) as I expect prices to fall at least to the 45-day moving average (now at $3125 and rising) and possibly even lower ($2900 - $3000).
Today crude oil made a double-bottom to its recent (April 9) low near $56 (July contract chart). As I've pointed out in recent blogs, it appears crude's trend has turned bearish, at least short-term, so it looks like prices could go lower. Although we may see a short-term bounce in prices from this support around $56, we are not in any reversal zones for two more weeks, so I suspect prices will turn back down and break that support.
President Trump is now promising a significant drop in gasoline prices (and the price of oil), and I think it would be foolish at this point to not take him seriously. Cycle analysis shows that crude could get as low as the $30 - $40 range by early next year. This market, however, could turn bullish again if the low from April 9 ($54.33) holds and prices can rally back above the 15-day and 45-day moving averages. I don't think this is likely, but anything seems to be possible these days. I am staying on the sidelines of crude for now.
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